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Challenges and Opportunities For Small and Medium Enterprises in Eastern Indonesia in Facing The COVID-19 Pandemic and The New Normal Era
Challenges and Opportunities For Small and Medium Enterprises in Eastern Indonesia in Facing The COVID-19 Pandemic and The New Normal Era
Challenges and Opportunities For Small and Medium Enterprises in Eastern Indonesia in Facing The COVID-19 Pandemic and The New Normal Era
id/TIJAB
TIJAB (The International Journal of Applied Business)
e-ISSN: 2599-0705
Vol. 4 No. 2, November 2020, pp. 79-89
Andri Irawan a 1
a University of Yapis Papua, Jayapura, Indonesia
APA Citation:
Irawan, A. (2020). Challenges and opportunities for small and medium enterprises in eastern indonesia in facing the covid-19 pandemic and
the new normal era. TIJAB (The International Journal of Applied Business), 4(2), 79-89.
Submission Date: 08/10/2020
Acceptance Date: 07/11/2020
Abstract
Eastern Indonesia is one of the areas affected by COVID-19 pandemic. Small and Medium Enterprises (SMEs)
such as; culinary businesses are the business sector most affected by this pandemic, where the implementation of
social restrictions has resulted in decreased income and also changes in business patterns. This condition certainly
provides new challenges and opportunities for SMEs owners. The purpose of this study is to explore the challenges
and opportunities of SMEs in eastern Indonesia during the COVID-19 pandemic and the new normal era. The
study method uses a qualitative approach with an exploratory strategy. The results of the study found that to face
the new normal era, SMEs have challenges such as the ability of human resources, understanding of information
technology, and business model transformation. An interesting finding in this study is that in facing the new normal
era, information technology is not a determining factor for increasing consumer trust and increasing income, but
product hygiene and environmental sanitation are the determining factors for the existence of SMEs in eastern
Indonesia.
Keywords: COVID-19 pandemic, small and medium enterprises, new normal era, hygiene and sanitation.
1. Introduction
The new normal era or a condition where humans have to change their life patterns during the
COVID-19 pandemic cause all activities must have restrictions such as social distancing, restrictions on
socio-economic activities aimed at avoiding the transmission of this virus. However, these restrictions
will certainly have an impact on the economic and social life of the community. In addition, with the
existence of this pandemic, the habits of the community in Eastern Indonesia tend to have changed, the
community is more careful in meeting their daily needs, both primary needs such as food and secondary
needs such as clothing, when in normal condition (before the pandemic), the community conducts
activities without being limited by health protocols, the fulfilment of primary and secondary needs is
1
Corresponding author.
E-mail address: andriirawan@uniyap.ac.id
80 Irawan / TIJAB (The International Journal of Applied Business), 4(2) (2020) 79-89
mostly carried out through direct transactions but now the situation has changed, COVID-19 has created
social construction and also new business changes for small and medium enterprises (SMEs) where new
business practices do not only promoting information technology as a strategy of competitive advantage,
but the guarantee of safety and health protection, product hygiene, and environmental sanitation are the
main demands for SME practices. This uncertain situation forces humans to adapt to new conditions,
that we have to behave normally in the pandemic era (New Normal Life era). We must continue our
activities by meeting health standards and self-protection procedures as an effort to prevent the spread
of COVID-19. The COVID-19 pandemic has forced countries in the world to create preventive
scenarios, such as regional quarantine and social restrictions. This pandemic has destroyed the health
sector and the economy globally (Bong et al., 2020).
2. Literature Review
Ahlstrom et al. (2020) states that the environment and new normal life will have an impact on
business practices and methods, for that the role of the leaders of the organization or the owner of small
and medium-sized businesses must prepare the power both through information technology and other
strategies, COVID-19 does not just have an impact on the health sector as stated by Zeegen, Yates, &
Jevsevar (2020) in which many hospitals have decreased income and increased expenditure due to
handling COVID-19 in the United States so researchers ask whether we will return to normal situations
or face new normality after COVID-19. Of course, the impact is clearly more widespread in other sectors
such as economy, politics, and security. To that end, the ability of leaders is very important in facing the
new normal life at this time where business practices will certainly be changed and will have an impact
on the marketing process, production and sales as well (Postavaru, Draghici, Filip, Mohammed, &
Mohammed, 2020). Furthermore, to improve business performance, owners of the small and medium
business must have entrepreneurial knowledge and abilities as well as strategic agility that will support
their business performance (Widjajani & Nurjaman, 2020). Moreover, Small and Medium Enterprises
must have an assessment of their business performance, have a business performance evaluation matrix
that is applied regularly to ensure business growth (Mahmudova, 2018). Small and medium businesses
must carry out open innovations such as understanding the desires of customers who put the commercial
aspects into perspective, in addition to product innovations are also important to do, as an important
note that small and medium businesses have very limited funding so the innovations carried out must
be in accordance with its business goals (Khan & Arshad, 2019). However, to face the challenges of
new normality besides information technology support, business organizations need personnel supports,
then new normality will be a challenge to find alternative solutions for the organization's existence.
Therefore, the business owners need to make a training plan for their personnel that will support the
development of their competitive advantage strategy (Peshkova, Kiselev, & Zimina, 2020). In addition,
if the company wants to recruit, the new normality of the recruitment system through social media is the
right solution, even though Jacobson & Gruzd (2020) states that most applicants who use social media
do not feel comfortable due to the revealed personal information on social media and can be seen by the
public. However, current information technology advances view that personal information is very
difficult to be protected, especially in new normalities we must begin to learn to accept it, however, the
company must still be committed to protect the personal data of their personnel and consumer from
crime. Cybercrime is the biggest threat to small and medium businesses that implement e-business today,
the mistake they have made is that they consider small-scale e-business to be very safe from cybercrime
threats, they consider that such crimes are only committed to bigger business entities, such thinking
makes a great opportunity for the perpetrators of crime to damage the e-business of small and medium
businesses (Bulletin et al., 2017).
. Irawan A / TIJAB (The International Journal of Applied Business), 4(2) (2020) 79-89 81
Restrictions on activity and physical distancing are now a global trend, the COVID-19 pandemic has
not yet ended, physical distancing will certainly become a new trend in new normality after the pandemic
ends and this will certainly affect many aspects such as health, social, and economic aspects in new
normal life. Even more stringent scenarios are conveyed by Cannistraci & Capua (2020) which states
that social interventions on population demographics in new normality are certainly needed in which
elderly people are more vulnerable to the risk of death compared to younger ages. This is certainly an
important note for stakeholders to carry out social interventions in the form of legal regulations or
policies that restrict activities for the elderly. Buheji & Ahmed (2020) state that the impact of COVID -
19 will clearly provide opportunities and challenges or negative and positive effects on social and
economic conditions, there will be many changes in life before and after the COVID-19 pandemic,
hidden opportunities and challenges are certainly important to be explored through studies. Furthermore,
study on the opportunities and challenges of COVID-19 in socio-economic conditions has been carried
out by Mustajab et al. (2020) who state that the impact of COVID-19 has forced many organizations to
force their employees to work from home, this condition has provided opportunities and challenges for
business organizations, including SMEs. There are some positive impacts of work from home such as
flexibility in working, work life balance, quality of time with family, meanwhile the negative impacts
are the amount of social distraction and decreased work motivation because working from home is not
a culture for many organizations.
There are many evidences that small and medium-sized businesses contribute to the national
economy, although the role of small and medium-sized businesses still has obstacles that must be
resolved such as the readiness of human resources, infrastructure and capital such as the results of studies
conducted by Eniola & Entebang (2015) and Tanasić, Janjić, & Kosec (2020). Thus, to maintain the
existence of small and medium enterprises in the midst of threats that risk bringing down their business,
however the role of government is needed through interventions that have a positive impact on SMEs
so that they can overcome these challenges if access to capital is open to them and clear legal protections
as conveyed by Mottaeva & Gritsuk (2017), Halunko, Halunko, & Savyuk (2019) who have agreed that
the closeness between the government as a regulator and SME entrepreneurs will be able to stimulate
the growth of SMEs, the development of information and communication technology should be done
by the government to support the growth of SMEs and also the legal certainty that must be created as a
form of protection for SMEs. Perception about changes in the industry in the current technological era,
all SMEs in the world almost experience similar problems like the problem of human resource
capabilities and also the entrepreneurial knowledge they have is still considered to be inadequate.
Besides, high economic growth is generally expected by all countries, but on the other hand, it can pose
risks to the development of small and medium-sized businesses because economic growth can trigger
inflation which impacts on people's purchasing power, therefore small and medium-sized businesses
have the greatest risk to be affected (Kristanti, Rahayu, & Isynuwardhana, 2019).
The results of previous studies, see Leick (2020), and see also Kurniawati, Al Siddiq, & Idris (2020)
have revealed a lot about what challenges SMEs must overcome to maintain their business, and what
opportunities do SMEs have? However, the results of studies reveal more about the need for information
technology and also the role of government to save SMEs from the threats of business failure. It should
be underlined that previous study findings may only apply to normal situations (before the pandemic),
the question is are the research findings still relevant for SMEs in facing the new normal life era that
will take place? The appeal of this study is in the results of exploration challenges and new opportunities
for small and medium enterprises in a pandemic situation. Facing the New Era of Normal Life will give
you a new perspective and a new paradigm for the study in the future, where information and technology
of communications is not the most significant factor for business survival. The determining factor for
82 Irawan / TIJAB (The International Journal of Applied Business), 4(2) (2020) 79-89
the resilience of SMEs in the New Normal era is the assurance of product hygiene from the production
process to marketing and sanitation of the business environment.
3. Method
The study method used is qualitative study with an exploratory strategy that aims to obtain an
explanation and description of the study problem as an initial finding that forms the basis for further
studies (John W. Creswell, 2014). Study informants were selected using purposive sampling by
determining the criteria of SMEs in the culinary field who have been in business for more than 3 years.
The reasons for choosing these criteria are because SMEs in Eastern Indonesia is more dominated by
the culinary sector and are the sectors most affected by the COVID-19 pandemic.
Interviews were conducted with 10 informants in Jayapura who are owners of traditional culinary
businesses, 5 informants from Makassar and also 5 people from Palu who are culinary business owners
who have used social media to market their business. The consumers we randomly interviewed are
regular consumers of the 20 participating culinary business owners.
Data collection was carried out by applying the COVID-19 protocols, which was done virtually
through video calls and Zoom Cloud Meeting with an average duration of interviews for 1.5 hours,
questions were given in an unstructured manner which aimed to dig deeper into the data and information
needed. Data analysis was carried out using the help of the qualitative data analysis software of NVivo
12 plus so that data management and analysis were more accurate. This study was conducted for 2
months starting from April to May 2020. Besides, we also conducted interviews with 20 consumers who
were customers at SMEs that became the informant in this study.
4. Results
Based on interviews conducted with 10 informants in Jayapura who are owners of traditional culinary
businesses, 5 informants from Makassar and also 5 people from Palu are culinary business owners who
have used social media for marketing their business. The consumers we interviewed randomly were
regular consumers of the 20 culinary business owners who were informants, this study has succeeded in
constructing the basic concept of challenges and opportunities for SMEs in Eastern Indonesia as initial
findings that will be a reference for further studies, challenges and opportunities for SMEs in Eastern
Indonesia can be described as follows:
Restrictions of transportation operation and operational on goods delivery services have resulted in a
scarcity of raw materials, especially raw materials that we have obtained from outside the island of Java
instant of; certain brands of wheat flour, pasta, and other ingredients. So, in this situation, we are induced
to limit the amount of production in order to be able to maintain business operations until the supply of
raw materials back to normal.
The continuance process of production can be maintained by maintaining the continuity of raw
materials. Proper and efficient management of raw material can reduce costs due to errors in the ordering
and storage of raw materials. Mistakes in managing raw materials also cause expenses for workers'
wages and delay the production process (Lubis, 2017).
own food which is considered safer. Strategies such as maintaining communication with consumers
have proven to be very effective, through short videos sent via social media and WhatsApp messages to
gradually bring back consumer trust, in this case, SME actors also consider it very important to provide
educational videos about the transmission of COVID-19 both to SME actors and consumers about the
transmission and prevention patterns of COVID-19 to provide a comprehensive understanding.
She also stated;
However, we have to think the strategy to get through from this situation, that there are many of our
consumers chose to reduce their consumption of food from our outlets, and then they chose to cook for their
families by themselves for their safety and health. Therefore, we try to convince our consumers by sending
short videos that we make from processing raw materials to marketing standards that we set through social
media such as WhatsApp. Most important, we have to keep up the communication with our customers to
maintain their trust and confidence. That our products are healthy, clean, hygienic, and at the same time,
we provide information about the COVID-19 health protocol.
Social media marketing communications greatly influence consumer cognitive, affective, and
behavioural responses. The interaction of consumers with social media produces a positive attitude
response and will increase their confidence toward the offered products (Duffett, 2017).
abilities so that SME actors do not need to do special education and training for their employees to
improve the ability of personnel following their business needs.
systems, transaction systems and production systems that prioritize health protocols and the use of
information and communication technology that before the pandemic period did not apply to their
businesses.
5. Conclusions
It can be concluded that the COVID-19 pandemic has created threats, challenges, and opportunities
for SMEs in Eastern Indonesia, the existence of SMEs depends on the extent to which they can overcome
the existing challenges and how their strategies are so that they can carry out the safest business
transformation during the pandemic. The role of information and communication technology (ICT) in
the current situation serves only as a supporting factor. The main factors of the current strength of SMEs
are the hygiene factors of the products and sanitation of the business environment and health protocols
that are applied both to employees and consumers so that the level of consumer trust and SME personnel
will be well established which will have an impact on SME growth and the readiness, especially for
SMEs in Eastern Indonesia in facing the COVID-19 pandemic and welcoming as well as adapting in the
New Normal era.
However, this study has limitations such as the limited area coverage which is only taken in 3 cities
located in Eastern Indonesia as well as data collection techniques that are carried out virtually with a
time limit. Therefore, further studies are expected to be carried out more longitudinally so that it will
contribute more broadly both theoretically and practically, especially to the problems of Small and
Medium Enterprises (SMEs) in Indonesia.
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Tantangan dan Peluang Usaha Kecil Menengah di Indonesia Timur Menghadapi Pandemi
COVID-19 dan Era Normal Baru
Abstrak
Kawasan Timur Indonesia merupakan salah satu wilayah yang terdampak pandemi COVID-19. Usaha Kecil
Menengah (UKM) merupakan sektor usaha yang paling banyak terkena dampak pandemi ini dimana penerapan
pembatasan sosial telah mengakibatkan penurunan pendapatan dan juga perubahan pola usaha, kondisi ini tentunya
memberikan tantangan dan peluang baru bagi pelaku UMKM. Tujuan penelitian ini adalah untuk menggali
tantangan dan peluang UKM di kawasan timur Indonesia pada saat pandemi COVID-19 dan era normal baru.
Metode penelitian menggunakan pendekatan kualitatif dengan strategi eksplorasi. Hasil penelitian menemukan
bahwa dalam menghadapi era new normal, UKM memiliki tantangan seperti kemampuan sumber daya manusia,
pemahaman teknologi informasi, dan transformasi model bisnis. Temuan yang menarik dalam penelitian ini adalah
dalam menghadapi era normal baru, teknologi informasi bukanlah faktor penentu untuk meningkatkan
kepercayaan konsumen dan meningkatkan pendapatan, tetapi kebersihan produk dan sanitasi lingkungan menjadi
faktor penentu keberadaan UKM di kawasan timur Indonesia.
Kata kunci: pandemi COVID-19, usaha kecil dan menengah, era normal baru, higienis dan sanitasi